Friday, May 23, 2014

It is unseemly to take the VA scandal as an opportunity to enjoy watching Paul
Krugman being proved wrong about universal health care.

Unseemly because the first order of everyone’s business
should be to fix the system. If the system cannot be fixed right away, the
government should find other ways to provide medical care to veterans. Of course, as some reports have pointed out, that would be an admission that private enterprise can do better than socialized medicine, and we would not want that... would we? Government employees have what we will call a perverse incentive to keep it all in house.

If, as has been reported, terrorists at Gitmo get better
health care than veterans get from the VA, something is radically wrong. And
if, as Michelle Malkin reported, illegal immigrants are receiving better health
care than veterans, something is very, very wrong.

The problem needs to be fixed before it needs to be
politicized. And yet, since President Obama used the condition of the VA to attack the Bush administration and since he promised to clean it up post haste, it feels a tad bit naïve to imagine that
the issue will not be politicized before it will be fixed.

Naturally, Republicans have used the VA scandal to
cudgel Democrats. But they also tried to make it all bipartisan. And yet, hopes for a bipartisan approach to the problem were
scuttled yesterday when Senate Democrats voted down the VA Accountability Act—which
had been passed on a bipartisan basis by the House.

And naturally, House minority leader Nancy Pelosi has blamed
it all on the Bush administration.

Be that as it may, conservative commentators have done their job by pointing to the larger issue. Liberal pundits, led by Paul
Krugman—who else?—have long since trotted out the VA as a test case proving the
greatness of socialized medicine.

In 2006 Krugman used the VA as proof that that socialized
medicine worked.

He wrote:

The
secret of its success is the fact that it's a universal, integrated system.
Because it covers all veterans, the system doesn't need to employ legions of
administrative staff to check patients' coverage and demand payment from their
insurance companies. Because it covers all aspects of medical care, it has been
able to take the lead in electronic record-keeping and other innovations that
reduce costs, ensure effective treatment and help prevent medical errors.

Moreover,
the V.H.A., as Phillip Longman put it in The Washington Monthly, ''has nearly a
lifetime relationship with its patients.'' As a result, it ''actually has an
incentive to invest in prevention and more effective disease management. When
it does so, it isn't just saving money for somebody else. It's maximizing its
own resources. In short, it can do what the rest of the health care sector
can't seem to, which is to pursue quality systematically without threatening
its own financial viability.''

For the
lesson of the V.H.A.'s success story -- that a government agency can deliver
better care at lower cost than the private sector -- runs completely counter to
the pro-privatization, anti-government conventional wisdom that dominates
today's Washington.

Crucially,
the V.H.A. is an integrated system, which provides health care as well as
paying for it. So it’s free from the perverse incentives created when doctors
and hospitals profit from expensive tests and procedures, whether or not those
procedures actually make medical sense. And because V.H.A. patients are in it
for the long term, the agency has a stronger incentive to invest in prevention
than private insurers, many of whose customers move on after a few years.

And
yes, this is “socialized medicine” — although some private systems, like Kaiser
Permanente, share many of the V.H.A.’s virtues. But it works — and suggests
what it will take to solve the troubles of U.S. health care more broadly.

As wrong as he was, Krugman did raise the right question.
Can a health care system function more or less effectively if there are no “perverse”
profit incentives? Would an army of presumably virtuous bureaucrats, motivated
more by the wish to do good and less by the wish to earn a profit, deliver
better health care? Are for-profit medical practices more interested in making
money than in caring for patients?

Theoretically speaking, Krugman is trying to establish a
beach head for socialism. If profit makes health care inefficient and
ineffective, then it will surely do the same for the rest of the economy.

Ah,
yes, the VA lacks the evil profit motive. What the egalitarians ignore,
however, is that a government system contains its own "perverse
incentives," such as rationing that leads to treatment delays and
preventable deaths, which the bureaucracy then tries to cover up. This isn't an
accident or one-time error. It is inherent in a system that allocates resources
by political force rather than individual consumer choices. The VA is
ObamaCare's ultimate destination.

VA officials
claim backlogs are due to difficulty hiring and retaining staff, but that's
another problem endemic to government health care. Compensation is often too
low to attract doctors, particularly in high-demand specialties like physical
therapy and gastroenterology. While VA medical centers can refer patients for
private consultations to reduce backlogs, they rarely do.

The history of socialism has demonstrated the Journal’s
point: if pay does not depend on performance, why work? It is not surprising
that VA physicians see far fewer patients than do those who are in private or
hospital practice.

Moreover, if a company does not make a profit, how can it
re-invest in new plant and equipment? How can it expand its business and better
compete against other companies?

If virtuous bureaucrats are charged with this task, what
makes you think that they will want to do what is best for patients they are treating or the companies they
are managing and not what is best for themselves and for the political special
interests that put them in power?

One suspects that Krugman will eventually respond by saying
that the VA does not work as well as it should because the private marketplace
has been siphoning off the best physicians. If there were no private market of
health care, all of the best physicians would be happily working for the
government.

And yet, no one is obliged to practice medicine. If another occupation
provides more job satisfaction and higher prestige, it will probably attract
more, better students.

Similarly with socialist enterprise. If the government takes
over the widget industry, because it believes that the profit motive is causing
the companies to be inefficient, then it will have to compete against foreign
companies that do not suffer the same level of bureaucratic control. It might
try to shut down competition with mercantilist tariffs against foreign-made
widgets, but the end result will be that American consumers will only be
able to purchase substandard widgets at inflated prices.

3 comments:

No profit motive leads to less accountability--how do you measure how well you're doing? If you're losing money, you KNOW you have to fix something. And bureaucracies want to grow, like a cancer.

I'll note that James Taranto of WSJ's Best Of The Web Today fairly often runs a PK quote that the Brit's NHS is run by the government, and all stories of bad care, sloppy hospitals and doctors and nurses, filth on the floors, etc., are THEREFORE wrong.

". If another occupation provides more job satisfaction and higher prestige, it will probably attract more, better students."

Big problem up here in the Great White North. Hockey is a religion here, so most of our natural and hard working athletes gravitate to it instead of the other sports. Therefore we are like 168 ITW in soccer, etc.

"It might try to shut down competition with mercantilist tariffs against foreign-made widgets, but the end result will be that American consumers will only be able to purchase substandard widgets at inflated prices....How do you think that will work out?"

We have already seen how that will work out.

Patients will try to get their medicines from Canada, and the FDA will shut that down because they are bought and paid for by big Pharma. So Americans will have no choice but to pay outrageously inflated prices for substandard medical widgets because the corporate owned government interferes with the free market currently in the US.